Review of 2010 – USD version - Skanska

Note
Not
16
Income taxes
14 Net financial items 2010 2009
Financial income
Interest income 30.2 32.9
Net interest on pensions 8.2
Gain on divestments of shares 6.5 0.1
Change in fair value 2.5 1.2
47.4 34.2
Financial expenses
Interest expenses –36.2 –54.5
Net interest on pensions –4.7
Capitalized interest expenses 6.4 24.6
Change in fair value –7.5 –12.9
Net exchange rate differences –1.7 –7.1
Net other financial items –13.3 –10.1
–52.3 –64.7
Total –4.9 –30.4
Disclosures on how large a portion of income and expenses in net financial items comes
from financial instruments are presented in Note 6, “Financial instruments and financial
risk management.”
Net interest items
In 2010, net financial items amounted to USD –4.9 M (–30.4) altogether. Net interest
items increased to USD 8.6 M (–1.7). Interest income decreased to USD 30.2 M (32.9)
due among other things to a certain downturn in interest–bearing assets and somewhat
lower short–term interest rates, measured as annual averages, in most of the currencies
in which Skanska was a net investor. Interest expenses including capitalized interest
decreased to USD –36.2 M (–54.5), which was mainly explained by a downturn in
interest–bearing liabilities.
During the year, Skanska capitalized interest expenses of USD 6.4 M (24.6) in ongoing
projects for its own account.
Interest income was received at an average interest rate of 0.77 (0.98) percent. Interest
expenses, excluding interest on pension liability, were paid at an average interest rate
of 3.06 (4.22) percent during the year. Taking derivatives into account, the average interest
expense amounted to 0.85 (2.58) percent.
Net interest on pensions, based on 2009 outcome and consisting of the January 1
net amount of interest expenses on defined–benefit pension plans and return on plan
assets, increased to USD 8.2 M (–4.7). See also Note 28, “Pensions.”
Gain on divestments of shares refers to divestments of Group companies that have
held stakes in companies that were engaged in aircraft leasing.
The Group had net interest items of USD 2.5 M (3.9) that were recognized in operating
income. See “Accounting and valuation principles,” Note 1.
Change in fair value
Change in fair value amounted to USD –5.0 M (–11.8). This was related to negative interest
rate differences in currency hedging of investments in Skanska’s development operations
as well as currency hedging of equity mainly in NOK and PLN.
Net other financial items
These items amounted to USD –13.3 M (–10.1) and mainly consisted of various financial
fees.
Income taxes are reported in compliance with IAS 12, “Income Taxes.” See “Accounting
and valuation principles,” Note 1.
Tax expenses
2010 2009
Current taxes –205.2 –180.2
Deferred tax benefits from change in
temporary differences 8.6 46.0
Deferred tax expenses/benefits from change in
loss carry-forwards 10.4 –60.5
Taxes in joint ventures –7.2 –11.5
Taxes in associated companies –0.1 –0.1
Total –193.5 –206.3
Tax items recognized under other comprehensive income
2010 2009
Deferred taxes attributable to cash flow hedging –7.5 –2.4
Deferred taxes attributable to pensions –33.2 –28.1
Total –40.6 –30.4
There was no deferred tax attributable to the category available-for-sale financial
assets.
Income taxes paid in 2010 amounted to USD –227.0 M (–128.8).
Relation between taxes calculated after aggregating nominal tax rates
and recognized taxes
The Group’s recognized taxes amounted to 26 (27) percent.
The Group’s aggregated nominal tax rate was estimated at 29 (29) percent.
The average nominal tax rate in Skanska’s home markets in Europe amounted to
about 24 (25) percent and in the United States more than 40 (40) percent, depending on
the allocation of income between the different states.
The relation between taxes calculated after aggregating nominal tax rates and recognized
taxes of 26 (27) percent is explained in the table below.
2010 2009
Income after financial items 752.4 757.9
Tax according to aggregation of nominal tax rates,
29 (29) percent –218.2 –221.1
Tax effect of:
Property divestments 33.9 29.9
Goodwill impairment loss –7.7
Other items –9.2 –7.4
Recognized tax expenses –193.5 –206.3
Tax assets and tax liabilities
Dec 31, 2010 Dec 31, 2009 Jan 1, 2009
Tax assets 74.4 74.2 105.1
Tax liabilities 147.4 148.0 111.9
Net liability 73.1 73.9 6.7
Note
15
Borrowing costs
Tax assets and tax liabilities refer to the difference between estimated income tax for the
year and preliminary tax paid as well as income taxes for prior years that have not yet
been settled.
Borrowing costs related to investments that require a substantial period for completion
are capitalized. See “Accounting and valuation principles,” Note 1.
During 2010, borrowing costs were capitalized at an interest rate of about
3.0 percent.
Interest capitalized
during the year
Total accumulated capitalized
interest included in cost
2010 2009 2010 2009
Intangible assets 13.1
Current-asset properties 6.4 24.6 33.2 52.9
Total 6.4 24.6 33.2 65.9
Skanska Review of 2010 – USD version Notes, including accounting and valuation principles 121